In any auction, different bidders may have different amounts of information regarding an auctioned item of unknown value. This is known as information asymmetry and often leads to different estimates of fair value for the auctioned item. For example, a car dealer likely would estimate more accurately the fair value of an auctioned car than would a jeweler, while the jeweler likely would estimate more accurately the fair value of auctioned jewelry than would the car dealer. Thus, were the jeweler and the car dealer to bid against one another in an auction for a car or for jewelry, information asymmetry likely would exist.
Where information asymmetry exists in some auction formats, bidders need to worry about the winner's curse, which is the tendency for a bidder with less information to bid too much and overpay for the auctioned item. As a bidder, such overbidding clearly is undesirable and can lead to buyer's remorse, or regret for having participated in the auction and having won the auctioned item. This may reduce the likelihood of the bidder participating in future auctions and/or may lead to bid shading (underbidding).
Since many bidders are implicitly or explicitly familiar with the winner's curse, in order to ensure that they do not overbid for an auctioned item, these “savvy” bidders may reduce, or shade, their bids to ensure that they don't overpay when participating in some auction formats. Worse yet, these savvy bidders might decide not to bid at all. Thus, as bidders with less information seek to avoid the winner's curse, sellers need to worry about receiving less than fair value for their auctioned items due to bid shading and/or due to prospective bidders deciding not to bid at all.
Sellers also must worry about collusion, or improper side agreements, among bidders that reduce the amounts bid. Bidders might, for example, improperly decide amongst themselves whom to let win an auction and at what price. The bidders also might, for example, signal through their bidding patterns what they are willing to bid and/or might punish those that bid against them in future auctions.
Sellers aren't the only ones that must worry about collusion. Bidders must worry about collusion between sellers and false, or shill, bidder(s), that drop out of an auction after stimulating additional bidding and driving up the high bid for an auctioned item. The risk of collusion is greater in auction formats where bidders and their bids are publicly disclosed during the auction.
When bids are publicly disclosed, another risk for both bidders and sellers is the risk of bid sniping, wherein a bid sniper enters a high bid just before the conclusion of the auction, such that there is no time for other bidders to enter higher counterbids. In some circumstances, this may allow the bid sniper to win the auction with a bid that is below the reservation price (i.e., the highest amount a given bidder would be willing to pay for the auctioned item) of one or more other bidders. Thus, bid sniping may produce a buyer whose bid is below what one or more other bidders would be willing to pay, may discourage prospective bidders from participating in the auction, and/or may provide the seller with less than fair value for the auctioned item.
Auctions often are performed over a telecommunications network, such as the Internet, using computer systems. As described, for example, in U.S. Pat. No. 5,960,411 to Hartman, et al., which is incorporated herein by reference in its entirety:                “The Internet comprises a vast number of computers and computer networks that are interconnected through communication links. The interconnected computers exchange information using various services, such as electronic mail, Gopher, and the World Wide Web (“WWW”). The WWW service allows a server computer system (i.e., Web server or Web site) to send graphical Web pages of information to a remote client computer system. The remote client computer system can then display the Web pages. Each resource (e.g., computer or Web page) of the WWW is uniquely identifiable by a Uniform Resource Locator (“URL”). To view a specific Web page, a client computer system specifies the URL for that Web page in a request (e.g., a HyperText Transfer Protocol (“HTTP”) request). The request is forwarded to the Web server that supports that Web page. When that Web server receives the request, it sends that Web page to the client computer system. When the client computer system receives that Web page, it typically displays the Web page using a browser. A browser is a special-purpose application program that effects the requesting of Web pages and the displaying of Web pages.        “Currently, Web pages are typically defined using HyperText Markup Language (“HTML”). HTML provides a standard set of tags that define how a Web page is to be displayed. When a user indicates to the browser to display a Web page, the browser sends a request to the server computer system to transfer to the client computer system an HTML document that defines the Web page. When the requested HTML document is received by the client computer system, the browser displays the Web page as defined by the HTML document. The HTML document contains various tags that control the displaying of text, graphics, controls, and other features. The HTML document may contain URLs of other Web pages available on that server computer system or other server computer systems.”        
In addition to HTML, web browsers on client computer systems (also known as “client-side” systems) may run other languages that enable more dynamic content, e.g. scripting languages, such as JavaScript, Extensible Markup Language (“XML”), a combination of the two known as Asynchronous JavaScript and XML (commonly referred to as “AJAX”), VBScript and Cascading Style Sheets (“CSS”). Client-side scripts may, for example, be embedded in an HTML document or may be in a separate file that is referenced by an HTML document. Client-side scripts are run locally by the client computer system. Web-enabled applications on a client computer system also may bypass web browsers and run as stand-alone Rich Internet Applications.
Server computer systems (also known as “server-side” systems) commonly run server-side scripts, written in languages such as Perl, PHP, ASP.Net and VBScript, that may, for example, be executed when a client computer system requests a document from the server computer system. Server-side scripts often retrieve information from, and/or modify information stored within, a database accessible via the server computer system. A common web application database system is the Relational Database Management System (“RDMS”). MySQL is an example of a RDMS.
As with some auction formats conducted by other means, auction formats conducted over telecommunications networks such as the Internet may be prone to information asymmetry, the winner's curse, buyer's remorse, bid shading, bid sniping, shill bidding and/or collusion. The perceived or actual relative anonymity provided by the Internet may increase collusion risks, especially in auction formats where bidders and their bids are publicly disclosed during the auction. Collusion may be conducted via bidder signaling in the publicly disclosed bids, or via bidders contacting one another during the auction but outside of the auction framework in order to arrange a collusive side agreement. Furthermore, publicly disclosed bids increase a risk of seller-instigated collusion, e.g., via shill bidder(s) that drop out of an auction after stimulating additional bidding and driving up the high bid for an auctioned item.
In view of the foregoing, it would be desirable to provide methods for establishing a value and a buyer for an auctioned item of unknown value that seek to diminish the corrosive effects of information asymmetry and align the interests of buyers and sellers by reducing the risks of the winner's curse, buyer's remorse, bid shading, bid sniping, shill bidding and/or collusion.
It would be desirable to establish a value and a buyer for an auctioned item of unknown value via computer-based methods that seek to diminish the corrosive effects of information asymmetry and align the interests of buyers and sellers by reducing the risks of the winner's curse, buyer's remorse, bid shading, bid sniping, shill bidding and/or collusion.